Government Bails Out Corporations – Small Businesses on Back Burner

Despite the fact that small businesses comprised 65% of the new jobs in the United States in the last fifteen years, employ half of the United States workforce, and account for over 30% of the nation’s exports, they have received less than $400 million of the Obama administration stimulus loans while a few large corporations such as Citigroup Inc. and General Motors received a whopping $50 billion.

Small businesses produce 13 patents for every 1 created by large corporations, clearly showing that the 29.6 million small businesses are the driving mechanism of innovation in the United States. Furthermore, small businesses face much higher risks, as their operational costs are higher, banks charge them more money, landlord costs are higher, and government regulations cost them $7,647 per employee, compared to $5,282 for large corporations. Out of every six small businesses created per year, five will close down.

It’s true that the Obama administration is trying to push forward a health care reform package that will provide citizens with affordable health-care, giving employers’ incentives to hire – but there is a catch as employers will have to pay into the program. It seems that the government bailout incentives have only widened the chasm between large and small businesses, which is a problem as large businesses don’t fuel the majority of the economy. Furthermore the government has decided not to bailout CIT Group INC., one of the largest investors in small businesses, and instead to bailout Citibank, Bank of America CORP and GE Bank.

It seems that small businesses will have to rely more on private investors to expand their businesses. Many have turned towards family members, friends and relatives to receive their funding. Other have turned towards unconventional methods of obtaining capital like merchant cash advances, a form of funding that purchases credit card receivables.

To read more about merchant funding click here!

To view the original Wall Street Journal Op-Ed Article click here!